Chapter 7 Financial Management

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Office of Superint
endent of Public Instruction

Page
1

April 2009

Child Nutrition Services


Chapter 7


F
inancial Management










This chapter describes standards and principles used in the establishment of a

r
eliable
C
hild and Adult Care Food Program (C
ACFP
)

financial management

system. “Principles of cost” and “allowable
CACFP

costs” are descr
ibed with an
accompanying explanation of required supporting documentation for
such costs.
Internal controls
which ensure that
CACFP

assets are safeguarded, are identified.
Compliance guidelines for procurement of goods and services are also described.






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endent of Public Instruction

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2

April 2009

Child Nutrition Services

Office of Superint
endent of Public Instruction

Page
3

April 2009

Child Nutrition Services


CHAPTER
7

Financial Management


SUBJECT

Standards

Section

7
.1

Issued

April

2009




I.

Policy



The sponsor is responsible for ensuring a sound financial management system is
implemented. Among other requirements, financial management includes
budgeting,
costing standards, internal controls, management of revenues and expenses, management
of property, procurement standards
,

and fiscal audits.


II.

Procedure


A.

The financial management system
must
, at a minimum, ensure:



1.

All accounting records
are supported by source documents.

2.

Records identify the source of all funds including income, payments made, assets,
and liabilities.

3.

Effective control over and accountability for all funds, property, and other
CACFP

assets to en
sure that they are safegua
rded and used solely for authorized purposes.

4.

Methods
are in place for

timely and appropriate resolution of audit and program
findings and recommendations.


B.

The financial management system must track and provide:


1.

Actual meal counts

of approved meals se
rved to enrolled children
.

2.

Household size and income data to determine tier status for providers and Tier II
household children.


3.

Records that support and document all applicable
CACFP

costs including, but not
limited to
,

salaries, fringe benefits, tra
vel costs, materials/supplies, equipment, other
capital expenditures, maintenance, repair costs, membership, subscriptions
,

professional activity costs, and rental costs.




4.

Records that support all income to the
CACFP

including
,

but not limited to
,

re
cords
supporting all tiering determinations.




5.

Records detailing procurement of goods and services including all food costs that
are
CACFP

fu
nde
d and ensure that such procurements meet federal and state
procurement standards.




6.

An accounting syste
m that ensures
CACFP

costs are correctly charged to the
CACFP
.


7.

Records identifying all children enrolled and in attendance.




8.

Adequate internal controls to maintain financial integrity of the
CACFP
.

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endent of Public Instruction

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April 2009

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endent of Public Instruction

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April 2009

Child Nutrition Services


CHAPTER
7

Financial Management


SUBJECT

Pr
inciples for Determining Costs

Section

7
.
2

Issued

April

2009




I.

Policy



The sponsor must ensure that all
f
ederal funds are used appropriately.


II.

Procedure


A.

The following principals must be used in determining
CACFP

related costs:


1.

2 CFR 220 (
OMB Circular A
-
21
)
, “Cost Principles for Educational Institutions
.
"



2.

2 CFR 225 (
OMB Circular A
-
87
)
, “Cost Principles for State, Local, and Indian Tribal
Governments
.



3.

2 CFR 230 (
OMB Circular A
-
122
)
, “Cost Principles for Non
-
Profit Organizations
.





4.

FNS Instruction 796
-
2, Revision 3
, “Financial Management

CACFP
.




B.

Any questions regarding the circulars should first be addressed to a sponsor’s fiscal
staff or accountant; if questions remain, call the
Office of Superintendent of Public
Instruction (OSP
I)
. These circulars are available in electronic form on the OMB Home
Page at
http://www.whitehouse.gov/omb/circulars/
.


C.

Basic C
onsiderations
.



1

Composition of total costs

t
he total cost of a contract
is the sum of the allowable
direct and allocable indirect costs less any applicable credits.


2.

Allowable costs

to

be allowed u
nde
r the contract, costs must be necessary,
reasonable, conform to OMB cost principles, and be applied to all programs of the
orga
nization.


3.

Reasonable costs

a

cost is reasonable if
,

in its nature or amount, it does not
exceed that which would be incurred by a prudent person u
nde
r the circumstances
prevailing at the time the decision was made to incur the cost.



4.

Allocable costs

a

cost is allocable to a particular contract in accordance with the
relative benefits received and if it is treated consistently with other costs incurred for
the same
purpose in like circumstances.
Any cost allocable to a

particular award or
other
cost
objective u
nde
r OMB cost principles may not be shifted to other federal
awards to compensate for funding deficiencies, or to avoid restrictions imposed by
law or by terms of the award.


5.

Applicable credits

the

term “
applicable credits


re
fers to those rece
ipts, or
reductions of expenditure, which operate to offset or reduce expense items that

are allocable as direct or indirect costs.

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endent of Public Instruction

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D.


Direct Costs
.



1.

Direct costs are those costs that can be identified specifically with a particular final
cost obje
ctive.



2.

A cost may not be assigned to the
CACFP

as a direct cost if any other cost incurred
for the same purpose, in like circumstances, has been allocated to an award as an
indirect cost.



E.

Indirect Costs
.





1.

Indirect costs may be allocated to
the
CACFP

only if the sponsor has an Indirect
Cost Plan that has been approved by the cognizant agency determined in
accordance with the sponsor’s applicable OMB cost principles.


2.

Indirect costs are those costs that have been incurred for several programs

and
cannot be readily identified for just the
CACFP
.


3.

Typical examples

of indirect costs for many non
profit organizations may include
depreciation or use allowances on buildings and equipment, the costs of operating
and maintaining facilities, and gen
eral administration and general expense, such as
salaries and expense of executive officers, personnel administration, and
accounting.

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endent of Public Instruction

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April 2009

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CHAPTER
7

Financial Management


SUBJECT

Allowable CACFP Costs

Section

7
.
3

Issued

April

2009




I.

Policy



Expendit
ures are costs incurred for the administration of the
CACFP

and which are
allowable u
nde
r the
CACFP

regulations and included in
the
sponsor’s approved budget.













II.

Procedure


A.

CACFP

Administrative Costs

a
dministrative costs are costs incurred
when planning,
organizing
,

and managing the food service operation.


1.

Planning activities include,

but are not limited to:


a.

Conducting pre
approval visits to providers
.



b.

Drawing up the sponsor’s
CACFP

M
anagement
P
lan that includes a budget and




a staff
ing plan.


2.

Organizing activities include
,

but are not limited to:


a.

Hiring and training of administrative personnel and on
-
site employees with regard
to
CACFP

guidelines
.








b.

Pro
curing facilities and equipment.







c
.

Communicating with customers
, parents, and community leaders about the
CACFP
.






d.

Attending
CACFP

meetings or conferences approved by
OSPI
.



3.

Costs associated with
CACFP

administration include
,

but are not limited to:


a.

Salaries

c
ompensation for personal services includes all compen
sation paid
currently or accrued by the organization for services of employees re
nde
red
during the contract. It includes, but is not limited to, salaries, wages,
directors

and executive committee member
s


fees,
fringe benefits
,

and pension plan costs.



Except as otherwise specifically provided, the costs of such compensation are
allowable to the extent that:

total compensation to individual employees is
reasonable for the services re
nde
red, conforms to the established policy of the
organization, is cons
istently applied to both federal and non
-
federal activities,
and that charges to awards whether treated as direct or indirect costs are
determined and supported as required.




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endent of Public Instruction

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b.

Fringe benefits

f
ringe benefits in the form of regular compensation paid to

employees during periods of authorized absences from the job, such as vacation
leave, sick leave, military leave, and the like, are allowable.

These benefits are
allowable provided such costs are absorbed by all organization activities in
proportion to t
he relative amount of time or effort actually devoted to each.



Fringe benefits in the form of employer contributions or expenses for social
security, employee insurance, worker’s compensation insurance, pension plan
costs, and the like, are allowable,
provided such benefits are granted in
accordance with established written organization policies.



c.

Equipment

e
quipment means an art
icle of non
expendable, tangible,
personal
property having a useful life of
more than

o
ne year and an acquisition cost

which
e
quals or exceeds the lesser of (1) the capitalization level established by the
organization for financial statement purposes, or (2) $5
,
000.


Items worth $5,000 or more with a useful life of at least one year can be
depreciated (use allowance) or directl
y expensed depending on the "use" of the
item.



Items that have a multi
-
program use can be either deprecia
ted or a use
allowance applied.
A use allowance cannot exceed six and two
-
thirds percent

(FN
S 796.2, Revision 3, VIII 13 a [2][
b
]
)
of the acquisiti
on cost.








Items worth less than $5,000 do not have to be depreciated and can be directly
charged to the
CACFP

as a reimbursable cost.
2 CFR 225
(OMB Circular A
-
87
)

considers equipment costing less than $5,000 to be supplies and thus can be
directl
y charged to the
CACFP
, that is, the equipment no longer has to be
depreciated.


d.

Depreciation and use allowances

c
ompensation for the use of buildings, other
capital improvements, and equipment on hand may be made through use
allowances or depreciation
.
The computation of use allowances or depreciation
will exclude:

(
1) t
he cost of land
;

(
2) a
ny portion of the cost of buildings and
equipm
ent borne by or donated by the federal g
overnment irrespective of where
title was originally vested or where it presen
tly resides
;

(
3)
a
ny portion of the cost
of buildings and equipment contributed by or for the organization in satisfaction of
a

statutory matching requirement.


e.

Office and educational supplies

t
he costs of materials and supplies necessary
to carry out the
CACFP

are allowable.
Such costs should be charged at their
actual prices after deducting all cash discounts, trade discounts, r
ebates, and
allowances received.
2 CFR 225 (
OMB Circular A
-
87
)

considers equipment

costing less than $5,000 to be supplies and

is allowable as direct costs without
specific awarding agency approval.

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endent of Public Instruction

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f.

Publication and printing costs

i
ncludes the costs of printing, distribution,
promotion,
mailing, and general handling.
If these costs are not identifiable

with a particular cos
t objective, they should be allocated as indirect costs to all
benefiting activities of the organization.






g.

Postage and t
elephone

c
osts incurred such as

postage, telephone, fax,
and
Internet service

for communication purposes. To the extent that t
hese costs are
identifiable with the
CACFP
, they may be charged to the
CACFP
.


h.

Rental costs

are
allowable to the extent that the rates are reasonable
considering

such factors as:

rental costs of comparable property; market
conditions in the area; alterna
tives available; and the type, life expectancy,
condition, and value of the property leased, subject to the following limitations.


(1)

Rental costs u
nde
r sale and leaseback arrangements are allowable only up to
the amount that would be allowed had the organ
ization continued to own the
property.



(2)

Rental costs u
nde
r less
-
than
-
arms
-
length leases are allowable only
up to the
amount that would be allowed had title of the property vested in the
organization.


(3)

Rental costs u
nde
r leases which are required to be
treated as capital leases
u
nde
r Generally Accepted Accounting Principles, are allowable only up to the
amount that would be allowed had the organization purchased the property
on the date th
e lease agreement was executed.


(4)

Certain rental costs that involve

less
-
than
-
arms
-
length transactions are
allowable but need specific prior written approval
.


i.

Utilities

c
osts incurred such as

water, electricity,
and
natural gas
used in
administrative facilities or offices.

Such costs shall be prorated where applicable
i
f other programs or functions share facilities or office spaces not related to the
CACFP
.


j.

Insurance premiums

i
nsurance includes premiums on insurance policies,
contributions to self
-
insurance reserves
,

and deductible payments for minimal
losses.

The cos
ts of insurance for the general conduct of the organization and
the prorated share of insurance coverage costs for nonprogram activities are
unallowable.


k.

Professional services

c
osts associated with legal and professional services
performed by persons who
are members of a particular profession or have a
particular skill and are not officers or employees of the sponsor. These costs
require specific prior written approval
.

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endent of Public Instruction

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l.

Purchased services

c
ontracted services may include
,

but are not

limited to
,

janito
rial services and security services
.
Costs for contracted services may be
charged over the period covered by the contract. Services must be directly
related to the
CACFP
.


m.

Maintenance and repairs

c
osts incurred for necessary maintenance, repair, or
upke
ep of buildings and equipment, which neither add to the permanent value of
the property nor appreciably prolong its inte
nde
d life,

but keep it in an efficient
operating condition, are allowable. Costs incurred for improvements, which add
to the permanent
value of the buildings and equipment or appreciably prolong
their inte
nde
d life, shall be treated as capital expenditures.



n.

Memberships, subscriptions, and

professional activity costs

c
osts of the
organization’s membership in
CACFP

related business,
technical, and
professiona
l organizations are allowable.
Costs of the organiza
tion’s
subscriptions to program
-
related business, professional, and techni
cal
periodicals are allowable.
Costs of program
-
related meetings and conferences,
when the primary pur
pose is the dissemination of technical information are
allowable. Membership in a civic or community organization requires specific
prior written approval
.


o.

Travel

c
osts associated with program operations, such as monitoring, provider
tr
aining, and an
y other program
-
related activities. In
-
state and out
-
of state travel
costs for workshops and conference
s

related to the
CACFP

are also allowable.




p.

Pre
-
contract costs

t
hese are costs incurred prior to the effective date of the
contract directly pursua
nt to the negotiation and in anticipation of the contract
where such costs are necessary to comply with the proposed delivery schedule
or period of performance. Such costs are allowable only to the extent that they
would have been allowable if incurred af
ter the effective date of the contract and
only with the written approval of the state
CACFP

office.


4.

Unallowable costs


a.

Administrative costs not included in institution’s approved budget

the

administrative
cost of maintaining central accounting records fo
r an agency with
multiple programs to meet organization requirements for overall federal, state, or
local government purposes except as an indirect cost calculated by an approved
rate.


b.

Bad debts

any

losses arising from uncollectable accounts and other cla
ims
related costs.

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endent of Public Instruction

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c.

Capital

expenditure costs for
:


(1)

Acquisition of land or any interest in land.


(2)

Acquisition or construction of buildings or facilities.


(3)

Nonexpendable equipment of any kind, unless approved in adva
nce.


(4)

Repairs which materially increase

the value or useful life of buildings,
facilities, or nonexpendable equipment.


(5)

Other
capital

assets including vehicles and local matching funds under the
Nonfood Assistance Programs.


d.

Ban
k c
harges for insufficient funds.


e.

Contributions to a contingen
cy r
eserve or any similar provi
sion for unforeseen
events.


f.

Contributions and donations using federal funds.


g.

Costs to solicit nonprogram business to increase attendance of individuals not
eligible for the CACFP.


h.

Entertainment costs to include cost of amuseme
nts, social activities,
ceremonials, and incidental costs such as meals, beverages, lodging, rentals,
transportation, and gratuities.


i.

Costs of membership in any country club
,

or social or dining club
,

or organization
are unallowable
.



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endent of Public Instruction

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endent of Public Instruction

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CHAPTER
7

Fi
nancial Management


SUBJECT

Reporting CACFP Income

Section

7
.
4

Issued

April

2009




I.

Policy



A sponsor must record
CACFP

income when received or specifically designated to be used
in the food service program.


II.

Procedure


A.

CACFP

income means inc
ome received by a sponsor from:


1.

Revenue from non
program operations when a separation of program and
nonprogram food service is not appropriate.


2.

Proceeds from the disposition of real and nonexpendable personal property acquired
with
CACFP

funds
.




3.

R
oyalties and other income earned from the sale or licensing of copyrighted work
developed u
nde
r

the program. Examples include,

but are not limited to
,
license fees
for

software developed to prepare p
r
ogram claims for reimbursements and

gross
income from t
he sale of c
ookbooks for use in the program
.


B.

Other income includes:



1.

Cash donations received by a sponsor that are specified by the donor to be used for
the support of the food service operation or its administration.



2.

Funds commi
tted by the in
stitution to the p
rogram, except for bona fide third party
short
-
term loans and interagency transfers
,

for cash flow purposes.



3.

Other than
CACFP

meal reimbursement funds, funds received for program food
service activities
from any federal, state, coun
ty,
or municipal government source
shall not be included as income.





4.

Funds received from the sale of unused or unneeded supplies purchased with
program funds.




C.

CACFP

income must be

reported on the claim form and be

properly documented and
acco
unted for.



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endent of Public Instruction

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Office of Superint
endent of Public Instruction

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April 2009

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CHAPTER
7

Financial Management


SUBJECT

Supporting Documentation

Section

7.5

Issued

April

2009




I.

Policy



A sponsor is responsible for maintaining documentation that supports
CACFP

operations.


II.

Procedure



A.

Documentation
of administrative labor includes official payroll records, employees' time
and attendance reports, and cancelled payroll checks.



B.

Documentation of travel/transportation costs (approved mileage rate times total miles
plus parking and toll fees) include
s a mileage record or log and applicable receipts.



C.

Documentation for a portion of the costs for office space, utilities, office supplies, and
communications includes, at a minimum, itemized receipts, invoices, and cancelled
checks as well as a logic
al allocation basis for claiming a portion of the cost.



D.

Documentation for contracted labor or services includes a copy of the applicable
contract or agreement, cancelled checks as well as a logical basis for claiming a portion
of the cost.



E.

Do
cumentation of training costs includes receipts, invoices, and a logical allocation
basis for claiming a portion of the cost.



F.

Documentation of purchased service costs includes invoices and cancelled checks.
Contracts or agreements
must

also be avail
able to support claimed costs.

A
reasonable, logical allocation method must support the portion charged to the
CACFP
.



G.

Documentation of equipment costs includes invoices and cancelled checks.


If
equipment is being depreciated, depreciation records a
re required. All records must be
retained during the life of the equipment and for 5 years after the end of the federal
fiscal year during which an equipment item is fully depreciated. Records must also be
kept beyond this period if audit findings have n
ot been resolved.



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endent of Public Instruction

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endent of Public Instruction

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CHAPTER
7

Financial Management


SUBJECT

Internal Controls

Section

7
.
6

Issued

April

2009




I.

Policy



Sponsors shall have in place adequate internal controls.

OSPI

recommends the following
internal controls be implemented.


II.

Procedure



A.

The primary responsibility for safeguarding assets and detecting and preventing waste,
loss, fraud
,

and

abuse rests with the sponsor.
Maintenance of an adequate system of
internal controls is indispensable in meeting this responsibil
ity.


B.

The internal control system includes implementation of policies and procedures that:


1.

Safeguard assets from loss or misappropriation
.



2.

Check the

reliability of accounting data.


3.

Promote operational efficiency.




4.

Encourage adherence to prescrib
ed managerial policies
.



C.

There are
two types of internal controls

accounting controls and administrative
controls.


1.

Accounting controls include:


a.

Systems
of authorizations and approvals.


b.

Separation of duties.







c.

Physical control over assets
.











d.

Internal auditing.


2.

Administrative controls include:


a.

Performance reports.


b.

Statistical analysis.


c.

Quality control.




d.

Training programs
.


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endent of Public Instruction

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D.

Internal control objectives include providing reasonable assurance that:


1.

Assets are safeguarde
d against loss from unauthorized use or disposition.


2.

Transactions are executed in accordance with management's general or specific
authorization.


3.

Transactions are recorded properly to permit preparation of financial reports.



4.

The central part of any in
ternal control system is separation of duties. Some key
areas are:


a.

The authorization of a transaction must be separated from the processing of the
actual transaction. For example, the individual who authorized a bill to be paid
should be different from

the person who writes the check and records the
transaction.


b.

Operations should be separated from the accounting and record kee
ping system.
For example, if a personnel m
anager controlled the accounting system, the
manager would be in a position to input
false payroll data and pass this
information u
nde
tected through the accounting system.


c.

The custody of assets must be separated from the accounting function. For
example, cashiers should not be involved in any accounting tasks for cash and
receivables.


E.

Other principles of internal control include:


1.

Periodic supervisory reviews should be performed.



2.

All transactions should be properly documented to reduce the l
ikelihood of errors
and the non
detection of errors. It is also important that documentation
is secured
from destruction and tampering.



3.

If possible, duties should be periodically rotated.





4.

Employees should possess competence in the d
uties they are hired to perform




and have the integrity to perform these duties.


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endent of Public Instruction

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F.

A major internal co
ntrol area is the receipt and disbursement of cash. The following
controls are recomme
nde
d:



1.

Cash Disbursements:




a.

All disbursements, except petty cash, should be checked.






b.

Checks should be pre
-
numbered and inventoried monthly.







c.

Only checks for "Petty Cash" fund reimbursement should be written to "cash."







d.

The check
signer must not be the person who writes the check or maintains the
cash disbursement journal, register, or general ledger.





e.

A person not otherwise involv
ed in the disbursement process should reconcile
bank statements.


f.

Checks should not be signed in advance.



2.

Cash Receipts:




a.

All incoming checks and cash should be counted in the presence of two people.







b.

All cash receipts should be re
corded on pre
-
numbered receipts as the money is
received.







c.

A person not directly involved in posting the books should fill out the deposit slips
and make bank deposits.







d.

All receipts shall be deposited in the bank intact and on a timely

basis.





e.

A person not involved in the receipt process should reconcile cash deposits.


3.

Physical Inventory:


a.

Maintain property record accurately.




b.

Every two years conduct an inventory and reconcile it with property records.





c.

Maintain descrip
tions of equipment with serial/identification numbers.


d.

Maintain acquisition date and unit cost.


e.

Maintain location, use,
and condition of equipment.



4.

Physical security

r
eview internal security measures to determine if they are
adequate to prevent
damage, theft, fire, loss, and vandalism.


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endent of Public Instruction

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endent of Public Instruction

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CHAPTER
7

Financial Management


SUBJECT

Procurement

Section

7
.
7

Issued

April

2009




I.

Policy



Procurements made with
CACFP

funds must conform to the stan
dards set forth in
regulations
7 CFR 226.22
, 7
CFR 3019, 7 CFR 3016

and applicable
cost principle
regulations in 2 CFR 220, 225, or 230

as summarized in the following procedures.


II.

Procedure


A.

Methods of Procurement

the

methods described in the following paragraphs must be
used for obtaining good
s and services:



1.

Price Q
uotations for Small Purchases (Unde
r $1
0
0,000):





a.

Small purchase procedures are relatively simple and informal procurement
methods that are sound and appropriate for the procurement of services,
supplies or other property,

costing in the aggregate not more than $1
0
0,000 per
year. If small purchase procedures are used, price or rate quotations must be
obtained from at least three qualified sources.


b.

Non
expendable equipment, vehicles, furniture
,

or other items with an acqui
sition
cost of $1,000 or more must have written approval from
OSPI

prior to the
purchase.


2.

Competitive Sealed Bids (Over $1
0
0,000):



Sealed bids are publicly solicited and a firm
-
fixed
-
price contract (lump sum or unit
price) is awarded to the most resp
onsible, responsive bidder whose bid, conforming
to all the material terms and conditions of the invitation for bids, is lowest in price.


3.

Competitive Negotiation (Over $1
0
0,000):



a.

Competitive negotiation may be used if conditions are not appropriate f
or the use
of formal advertising; however, prior approval from the
OSPI

is required.



b.

Proposals are requested from a number of sources and the Request for Proposal
is publicized.


c.

Negotiations are normally conducted with more than one of the source
s
submitting offers, and either a fixed
-
price or cost
-
reimbursable type contract is
awarded, as appropriate.



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endent of Public Instruction

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22

April 2009

Child Nutrition Services






4.

Noncompetitive N
egotiation (Over $1
0
0,000):

a.

Noncompetitive negotiation is procurement through solicitation of a proposal from
only one sou
rce, or after solicitation of number of sources, competition is
determined inadequate.

b.

Noncompetitive negotiation may be used when the award of a contract is
infeasible u
nde
r small purchase, competitive bidding (formal advertising), or
competitive nego
tiation procedures. Prior approval from the
OSPI

is required.



B.

Procurement p
rocedures
will include, but are not limited to:

1.

The sponsor will establish procurement procedures

according to CACFP
Procurement Standards (Form SPI 1136PS [Rev. 7/08])
.

2.

Affirma
tive steps must be taken to assure that small and minority businesses are
utilized when possible.


3.

All procurement transactions will be conducted in a manner that provides maximum
open and free competition.



4
.

All procurement transactions will be c
onducted in a manner that avoids conflict of
interest, real or apparent.

Conflict would arise when a transaction involves the
employee, officer, or agent and:

a.

Any member of his/her immediate family
.


b.

His or her partner
.

c.

An organization that employs or is
about to employ any of the above and has a




financial or other interest in the firm selected for the award.

5.

Solicitations of offers will incorporate a clear and accurate description of the
requirements so as not to unduly restrict competition, and also

set forth all
requirements and other factors to be used in evaluating bids.


6.

Awards will be made only to responsible contractors.



C.

Bids will

be
:



1.

S
olicited from an adequate number of sources, vendors
,

or caterers.



2
.

P
ublicly advertised at least 14
days before bid opening.


3.

Clearly defining
the services needed.


4.

O
pened publicly at the time and place sta
ted in the invitation for bids.


5.

A
warded by written notification to the responsive bidder with the lowest bid price.


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endent of Public Instruction

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23

April 2009

Child Nutrition Services




D.

Purchasing/l
easing
of equipment, furniture
,

and A
utomatic Data Processing (ADP)
equipment
.



1.

Equipment leases

l
eases for equipment are allowable if the rates are reasonable,
taking into consideration such factors as rental costs of comparable equipment;
alternatives availabl
e; and type, life expectancy, condition
,

and value if equipment
leased. A lease with an option to purchase or one that creates material equity in the
equipment is also allowable only up to the amount that would be allowed had the
sponsor purchased the equ
ipment on the lease date.


2.

Purchase/l
ease of
ADP

equipment

s
ponsors must have written approval from the
OSPI

prior to obtaining any ADP equipment.

ADP equipment includes all computer
hardware and peripheral equipment. The sponsor must obtain equipment
c
omparisons and price quotes for lease and purchase of equipment. All software
must be approved by the
OSPI

prior to purchase.


3.

Purchase/Lease of Equipment and Furnitur
e and Automatic Data Processing
Equipment



a.

U
nde
r $5,000

n
o prior
OSPI

approval for the

specific item is needed

but it must
be in the approved budget
. Verify that adequate funds are available prior to
purchase/lease.




b.

Over $5,000

OSPI

prior written
approval is re
quired prior to purchase/lease.
The sponsor must obtain equipment compa
risons and price quotes
for lease

or
purchase of equipment.

To obtain
OSPI

approval to purchase/lease equipment,
the sponsor must:






(1)

Verify that adequate fund
s are available.

Adequate

funds may vary according
to the method of purchase/lease.


(2)

Submit

a written request for
-
lease or for
-
purchase

of the item including
verification that price quotes were obtained from an adequate nu
mber of
qualified sources. For
-
lease or for
-
purchase
,

three

quotes are required.



4.

Copies of price quotes must be sent t
o
OSPI
. List first and second choices for
lease/purchase in order of acceptability.

Include an explanation for the choices.


If the lease/purchase is not requested from the lowest responsible bidder, include
justification for requesting a vendor who did

not submit the lowest bid. Lease
information must include all terms of the lease including disposition of equipment

at the termination of the lease.



5.

The steps identified above are the same regardless of whether the item is
p
urchased
by

paying cash
or making payments.






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endent of Public Instruction

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April 2009

Child Nutrition Services



E.

Disposition Procedures
.



1.

Disposing of Equipment

equipment
with a per item value
of
more than $5,000

and paid for with USDA/CACFP
funds may

not

be disposed of without prior written
approval from
OSPI
.




2.

When requesting approv
al to dispose of equipment or to trade
-
in old equipment, give
the following information to
OSPI
:


a.

Item and brief description (model number, etc.)
.



b.

Original date of purchase
.


c.

Purchase price
.





d.

Percent of
CACFP

funds used when purchase was made
.








e.

Current condition of equipment.


F.

Terminating Participation Procedures
.


1.

If a sponsor terminates participation in the
CACFP
,
OSPI

must be contacted
immediately regarding disposal of
CACFP

equipment and provide the following

i
nformation

for each ite
m:


a.

Description
.



b.

Purchase date.


c.

Original purchase price
.



d.

Current condition
.





e.

Current fair market value
.





2.

Items mu
st be listed as operable units
;

for example, a computer would include the
CPU, monitor, keyboard, software,
and
cabl
es.



3.

Fo
r equipment
or supplies valued at less than $5,000
, the sponsor
may

transfer

or
sell

the equipment to another organization

without further obligation to
the state or to
the
USDA.

However, OSPI recommends that the transfer or sale of equipment first
be ext
ended to another sponsor

participating in the
CACF
P.

The sponsor who
receives the item cannot pay for the
equipment or supplies

with USDA funds. If
sold, the sponsor must compensate the federal government for its share.